A survey conducted by ETF provider HANetf has revealed that 94% of wealth managers believe investing in defence stocks is compatible with ESG principles, and over 90% of wealth managers are likely to consider active ETFs as a means of gaining market exposure.
The findings are part of HANetf’s latest Thematic & Digital Assets Review, which explores key trends in thematic investing and features expert insights from partners such as VettaFi, ETC Group, and EMQQ Global.
The survey, commissioned in collaboration with tech provider Pureprofile, also highlighted that the conflict in Ukraine has prompted a reevaluation of the ESG-compatibility of defence investments, with many now seeing defence as essential to global stability and security. Additionally, 98% of respondents stressed the importance of the geographical location of defence companies, with a preference for those domiciled in Nato-aligned countries.
The rising interest in active ETFs reflects a broader trend in Europe, where ETFs have traditionally been associated with passive strategies. The researchers are observing a shift, similar to what has occurred in the US, where active ETFs have dominated new issuances over the past three years.
Defence spending becomes “less of a problem” – even for ESG
Other findings from the survey include bullish sentiment on defence stocks (70%) and decarbonisation (66%), while only 30% expressed optimism about AI investments. Additionally, oil and gas remain the primary energy exposure for most investors, with only 10% holding positions in nuclear energy. Interestingly, 74% of respondents believe the ESG credentials of gold ETCs are significant, further illustrating the growing emphasis on sustainability in commodity investing.
36% of investors predicted that active ETFs will experience the most growth in Europe over the next five years, with 94% likely to consider them as part of their portfolios.
Hector McNeil, co-founder and co-CEO of HANetf, said: “According to the survey, an astounding 94% of investors believe that defence investing does not contradict ESG. This is heartening to hear. As the world looks ever more geopolitically risky, democracies such as the US, UK and EU need to rebuild their defence industries. Having this sector starved of capital due to perceptions of it not
being compatible with ESG would be highly concerning. At the same time, it is interesting to see that investors are aware of the risks around exposure to defence companies domiciled in geopolitically risky countries – it is for this reason we opted for the NATO screen for the Future of Defence Ucits ETF (Nato). Nato is by definition a defensive alliance, so restricting exposure in the ETF to companies based in Nato-aligned countries is vital.
Like over a third of investors surveyed, the provider also believes active ETFs are potentially the next big growth area for the ETF industry, he added.
